Tax saving

Pune, Bengaluru, Hyderabad and Ahmedabad now get 50% HRA

Updated October 2026 · 5 min read

For decades only Mumbai, Delhi, Kolkata and Chennai counted as metro cities for house rent allowance. Salaried people in Bengaluru or Pune paid rents just as high but could only claim the lower 40% limit. The Income Tax Rules 2026, which came into force with the new Income Tax Act on 1 April 2026, fixed that.

The eight cities with the 50% limit

Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad. Every other city stays at 40%.

How the HRA exemption is calculated

The tax-free part of your HRA is the lowest of these three amounts:

1. The HRA your employer actually pays you.
2. 50% of basic salary plus DA in the eight cities above, or 40% elsewhere.
3. The rent you pay minus 10% of basic salary plus DA.

Whatever HRA is left above that amount is added to your taxable salary.

An example from Pune

Basic salary plus DA of ₹50,000 a month, HRA of ₹25,000 a month and rent of ₹30,000 a month.

That is ₹60,000 more of exempt income each year. In the 30% bracket, it saves about ₹18,700 in tax including cess.

Things to know before you claim

• HRA exemption is available only under the old tax regime.
• If yearly rent is above ₹1 lakh, you need your landlord's PAN.
• The new rules ask you to state your relationship with the landlord. Paying rent to a parent is allowed if they actually own the home and declare the rent as income.
• Keep rent receipts or bank transfer records for the whole year.